Cautionary believes it can generate after-tax cash inflows

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Reference no: EM131586843

Cautionary Tales, Inc., is considering the acquisition of Danger Corp. at its asking price of $160,000. Cautionary would immediately sell some of Danger's assets for $16,000 if it makes the acquisition. Danger has a cash balance of $1,600 at the time of the acquisition. If Cautionary believes it can generate after-tax cash inflows of $20,000 per year for the next 66 years from the Danger acquisition, should the firm make the acquisition? Base your recommendation on the net present value of the outlay using Cautionary's 12?% cost of capital.

Reference no: EM131586843

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